Lesson 1. Why should you choose to invest in industry theme funds

Hello！

Over the course of the next 3 articles, we will introduce what industry-themed funds are, how to allocate industry-themed funds, and how to pick out excellent industry-themed funds.

After studying these three articles, whether it is base selection or fund allocation, you will have obvious progress!

1、What is an industry-themed fund?

Simply put, the investment direction of this fund is only focused on one industry or theme, such as consumption, new energy, and the pharmaceutical industry.

For example, an industry-themed fund called "XX Clean Energy" whose investment strategy may include investing in company stocks or bonds in clean energy industries such as solar, wind, and hydropower.

The advantages of investing in industry thematic funds are obvious. That is, they can meet the investment needs of investors for a specific industry. As long as the timing is appropriate, industry funds can often obtain excess returns beyond the index for a period of time!

2、Which industries have performed better in the past 10 years?

When selecting industry thematic funds, which industries should we start with?

The Tiger International investment research team counted the average ROE of 30 CITIC Tier 1 industries from 2012 to 2022, as shown in the following figure:

Chart prepared by： Tiger International Investment Research Team

We can clearly see that the top three in terms of average ROE in the industry are food and beverage, home appliances, and banks.

The ROE of the liquor industry is 15.91%, the highest of the three industries.

Therefore, if we want to choose the best-performing industry theme funds, the food and beverage industry may be our first consideration.

3、 How to select sub-industries for food and beverage?

Did you know? The food and beverage industry is a large industry, which can be mainly divided into sub-industries such as liquor and mass goods, among which mass goods products can be divided into beer, condiments, dairy products, meat products, quick-frozen food, leisure food, etc.

With so many sub-sectors, how do you make the right choice? Here are some points for your consideration

a.Better performance than CSI

Data source： Wind.

From 2012 to 2022, the CSI Liquor Index had significant excess returns compared to the CSI 300 Index. The average annualized return of the CSI 300 Index over the past 10 years was 4.51%, but the CSI Liquor Index reached 16.98%, equivalent to 3.7 times that of the CSI 300 Index.

b.Top performance among peers

Within the food and beverage industry, the liquor industry is also top performance among peers

Data source： Wind.

Based on the statistics provided by Wind, it can be seen that from 2019 to 2022, the cumulative yield of the liquor industry far exceeds that of several other segments in most years.

c.Higher future potential growth

In addition to the good performance in the past, the future potential of the liquor industry is also higher.

China has a super-large market composed of 1.4 billion people and more than 400 million middle-income groups, and the per capita consumption, per capita consumption amount, and market concentration of many subdivided consumer industries are still low.

Baijiu is deeply rooted in traditional culture for Chinese consumers, especially for the middle class, and in some scenarios, such as communication, entertainment, business banquets, and liquor consumption is just needed to some extent.

So there is greater room for growth in the future.

Data source： Ourworldindata

Not only that, the increase in high-net-worth people and per capita wealth has also brought a lot of room for growth to high-end and sub-high-end liquor. It can be said that the expansion of China's middle class is an important supporting force for the demand for high-end and sub-high-end liquor, and is the core factor supporting the growth of liquor in the long-term cycle.

Data source： Wind

After learning more about the historical performance and future potential of the liquor industry, are you excited about the theme fund of the liquor industry? Don't worry, in the next two articles, you will learn about the idea of allocating liquor industry funds and how to choose the corresponding fund.

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